Good Claims Require Prompt Notice

Kegler Brown Construction Newsletter

Ohio courts have recently adopted a disturbing trend of disposing contractor claims – other than on the merits – by throwing them out on “technicalities.” The most common pitfall for contractors is a failure to strictly comply with the notice provisions in the contract documents. Many contractors do not want to “rock the boat” early in the project and wait to see if things can be “worked out in the end” without legal involvement. Others fear being labeled adversarial or a “claims contractor.” Yet whatever the reason, the problem is the same – a lack of timely formal notice.

A recent case, decided at year-end, illustrates this problem. A plumbing contractor on an OSFC project took the position that storm collection installation more than 5 feet beyond the building was outside the scope of his plumbing contract. The School District sent the plumbing contractor a 48-hour notice to perform the disputed work, and the contractor agreed to do the work under protest pending a resolution. A month later the contractor submitted a claim for additional time and money, and a month after that, the project architect denied the claim.

The contract provided that the contractor was to submit claims within 21 days after occurrence of the event giving rise to the claim; and that failure to do so (on the proper claim form) within 21 days was a waiver of the claim. The attorneys for the School District successfully argued at trial that the claim should be dismissed because a formal claim was not made within the original 21-day period.

The contractor tried to explain that his approach was simply to “work things out” and that the construction manager knew of his position from conversations at the outset, and that he did not even receive the claim forms from the construction manager until months later.

The Fifth District Court of Appeals (by a 2-1 vote) agreed with the trial judge and threw out the claim for being untimely, stating:

“The drafters of the public … construction contract at issue wisely put in a provision to require timely submission of claims in case of such disagreements, in order to encourage early resolution thereof while the project is ongoing, rather than to allow cost overruns and further burdens on taxpayer resources.”

- Peterman Plumbing v. Bd. of Educ. Pickerington Local School District, Case No. 10CA-9 (12-30-10)

The lone dissenting Judge pointed out that the contractor was not given the claim form (which was omitted from the original contract documents) until much later in the job and asserted his claim within 21 days after that date – all to no avail.

The moral of the story is that contractors must strictly comply with the notice and claim procedures in the contract documents or risk the dismissal of an otherwise meritorious claim on a legal “technicality.”